Head of gambling board says stadium financing will overcome bumps

Make no mistake about it, Tom Barrett says. There have been “bumps in the road” and the net results from the state’s foray into electronic gaming are not what he would prefer.

But all is not doom and gloom, either, said Barrett, executive director of the Minnesota Gambling Control Board. He said progress is being made as the gambling board guides the expansion of electronic pull-tabs and electronic bingo for charitable groups across the state.

Tom Barrett, executive director of the Minnesota Gambling Control Board, demonstrates one of the many electronic gambling devices when appearing recently before a committee of the Minnesota Legislature.(Sun photo)

At stake in the venture is revenue needed by the state to pay for bond costs related to the financing of the new stadium for the Minnesota Vikings. The $975 million stadium is slated to receive $477 million from the Vikings and $498 million from the state and the city of Minneapolis.

Charitable gambling was tagged as the state’s funding source by the Republican-controlled state Legislature last spring, and the stadium bill was signed into law by DFL Gov. Mark Dayton.

Early criticism followed the rolling out of electronic pull-tabs. Barrett says it has taken more time than expected to approve vendors and distributors for hand-held iPad devices that will be used at bars and restaurants along with the traditional paper pull-tabs. The electronic bingo game is now being introduced, he said, and its impact has yet to be felt.

Critics were quick to feast on the early results that showed just under $2 million of the estimated $35 million in revenue the state will need to cover bond costs next year. The first bond sale to fund the stadium is set for late summer or early fall.

The linked bingo venture will have 100 active sites by the end of the month, Barrett said. The gambling board has approved one vendor so far and plans to OK a second vendor next month. The board is expecting two additional vendors to seek state approval.

The same pattern also holds for e-pull-tabs, although the number of sites offering the electronic gaming is below expectation, Barrett said. The gambling board has approved 227 sites for electronic pull-tabs and 215 are active. The others are still in training, he said.

When the program began taking shape last summer, Barrett said 450 active sites were projected for April of 2013. In all, the state has 2,800 sites today where some form of charitable gambling is offered – pull-tabs, bingo, raffles, paddle wheels or tip boards.

Once the e-pull-tab system is fully operational, Barrett said, 2,500 sites would be the maximum number offering electronic gaming. Paper pull-tabs must be offered under the gaming legislation, he said.

To date, Barrett said, three electronic pull-tab manufacturers are approved and nine distributors are handling game sales to charities. Two additional e-pull-tab manufacturer applications are pending.

“We’re still early in the game,” Barrett said. “It is a process.”

Hurdles

The task of getting the games out is just one hurdle for Barrett and the gambling board.

He says he is aware that some segments of the public prefer paper games. “We’ve heard that,” he said.

The social aspect of playing pull-tabs is a factor, he said. But with time, he believes the public will find similar social bonds when a group of players use the iPad game.

There are some sites where both paper and electronic games are working well. “There are some sites that are doing phenomenal,” Barrett said.

A bar in Mankato that ranked 138th best in 2012 is now the state’s leading producer, Barrett said. The bar averaged $111,000 in receipts last year prior to adding electronic pull-tabs. The average is now $155,000 a month, Barrett said, adding that paper pull-tab sales have also gone up.

Barrett said he would not second-guess the process used last year to form revenue estimates with the help of the gaming industry. “They did not drive the estimates,” Barrett said.

It was new ground for the gambling board and the input from the industry was vital, he said.

“Nowhere in the country has this kind of gaming been tried,” he said. “We still stand behind the methodology.”

Big business

That charitable gaming is big business is a fact, Barrett said.

Last year, charitable gambling reached $1 billion in total revenue. That netted $41.2 million in taxes for the state’s general fund.

The 2012 total is less than the high water mark in 2004 and 2005 when total revenues hit $1.4 billion. (Barrett believes the recession and smoking ban in public places are partly to blame for the decrease in total revenues.)

And the fund will grow in 2013, due largely to electronic gaming, he added. To date, the state is 6-7 percent ahead of its pace at this time a year ago.

Under the legislation for electronic gaming, the stadium bonds will see additional support from charitable gaming that exceeds a base amount needed for existing general fund projections.

The stadium bill requires that all charitable gaming tax proceeds that exceed the base level (based on fiscal year 2011 and as determined by commissioner of revenue) will be dedicated to pay the bond expense, Barrett said. The “base level” amount is the amount of taxes generated from charitable gaming to the general fund prior to the stadium bonding.

According to the department of revenue, the base level is $36.9 million.

Translation: The first $36.9 million of gambling taxes collected from all forms of charitable gaming are dedicated to the general fund. After the $36.9 million is reached, all other collections are dedicated to the bond expense, not just the tax from the electronic games, Barrett said.

With base established at $36.9 million and current charitable gambling taxes running 6-7 percent ahead of last year’s $41.4 million, it is likely that more than $7 million will be available to help pay bond debt service in 2014, Barrett said.

As more electronic games come into play and the public has more time to draw their own conclusions, Barrett remains optimistic that targets will be met. The targets will be helped by e-bingo.

The venture for Mega Bingo several years ago did not achieve the success hoped for, Barrett said. Lack of marketing and promotion hurt, he said, but so did the cumbersome mode of operation of running the games twice a day.

That will change with the new electronic bingo. Games will be played every 7 to 10 minutes throughout the day. “You only need two people to play,” Barrett said.